I have nothing but respect for Rick Santelli.  Why should someone get a free ride when the majority of Americans (92% approximately) are making their mortgage payments even if it’s difficult to do so in the current environment.  It’s all about social responsibility.  My hat goes off to Rick for standing up and shaking the White House Tree.  He really pissed people off in the administration to a point where they came out and went on the attack on television.  Freedom of speech baby, suck it up and take your lumps White House because this isn’t over by a long shot.

 

Give em hell Rick, American was not built on handouts and rewarding failure.  Failure and renewal must occur if the free markets are to function and allow our country to recover from this nasty recession.  More on this and the Obama Lunchcapades plan and how it affects you in my next blog.

 

Here is a link to the video if you are interested. 

 

Santelli’s Tea Party

CNBC’s Rick Santelli and the traders on the floor of the CME Group express outrage over the notion they may have to pay their neighbor’s mortgage, particularly if they bought far more house than they could actually afford, with Jason Roney, Sharmac Capital.

 

http://www.cnbc.com/id/15840232?video=1039849853

 

Blogging from the front line of the housing crisis and www.thenegotiatedsolution.com

 

GHunter

If you pay attention to CNBC you may begin to get the impression that the government is going to begin subsidizing mortgages and even sending out checks to get people out of trouble.  It sounds great for many people in this time of crisis but remember we haven’t seen the details.  The Devil is always in the details.

 

The first thought that comes to mind is the shear number of people that are underwater on their mortgages. The second thought is what will happen if the government incentivizes failure and gives money to people through subsidies or other debt forgiveness plans.  What will the people do that are not in trouble but still fighting to make a mortgage payment that may not be ideal?  They probably will default and look for the free handout. 

 

It’s a very difficult decision in determining who and how to help without making the housing problem in our economy worst.  The key is to stabilize housing.  I thought the tax credit for purchasing an existing home went a long way toward helping only to find out it was cut back and now only available for new first time home buyers.

 

Instead of waiting for another failed government program have you considered your current options?  I had a client last week tell me he was waiting on what the government was going to do before determining if he was going to face the responsibility for his problem with an investor property. 

 

If you have Mortgage Troubles here are your options to avoid foreclosure:

 

1)      Loan Modification:  A modification with your existing lender is a move that can be considered if you want to stay in your home.  Modifications don’t have a high success rate because people’s expectations are not realistic.  You lender may cut your payment down by a couple hundred dollars per month but don’t expect them to forgive any of the debt.  All of the reduction in payments will be added to the back of your mortgage for you to make up in the future.  A modification is nice for a select few but it won’t help you if you don’t have a job and can’t make any payments.  It also may require you to be delinquent before any consideration by your lender.  Whatever the new payment is associated with a successful modification, you will have to make it to avoid foreclosure regardless if you owe more than the current value of your home.  Don’t expect a market rate of interest for your new payment.  If you do you are setting yourself up for a major disappointment.  The lender really doesn’t care.  You owe them the money and that is pretty much the end of any discussion.

 

2)      Hybrid Refinance:  A Hybrid Refinance is a more constructive means of seeking a long term affordable solution if you are underwater on your home but would genuinely like to stay in your home.  This vehicle carves out a chuck of your existing indebtedness from your lender with a new loan and seeks to mitigate and/or restructure any residual debt.  The end result is an affordable long term solution. The new market rate first trust loan is usually 85-95% of your homes current market value.  You do not have to be delinquent to qualify for a Hybrid.  Not everyone is qualified for this solution.  You must be gainfully employed and you must also qualify for the new loan based on income and credit.   Again, this is an innovative solution that helps a select group of people that are underwater on their homes.  If you have bad credit, insufficient income, or no job you are simply not eligible for the Hybrid.

 

3)      Real Estate Short Sale:  The Short Sale is not the option that will allow you to stay in your home.  The Short Sale is a workout with your lender that enables you to sell the home for less the indebtedness.  This is the only vehicle that will provide the opportunity for forgiven mortgage debt.  This should be considered if you simply cannot afford or qualify for the loan modification or hybrid refinance.  Many people owe hundreds of thousands of dollars over what their properties are currently worth. Others have too much exposure with second homes and investment properties where the values have literally cratered.  In these scenarios you need a real plan.  I hear people all the time suggest that they will hold out until the market comes back, only to call back a couple months later with a sob story of how their tenants lost their job and can’t pay the rent.  Denial is not healthy.  We cannot influence the market so we have to follow it. The current price trend in the national real estate market is down. 

 

Realistically these are the only three options you have to stop and/or avoid foreclosure if you are currently at an affordability crossroad.  It is imperative to think clearly and address the problem.  All three options are available at www.thenegotiatedsolution.com

 

As I said in an earlier blog, the government is going to save the free markets.  I will be shocked it they subsidize mortgages even for people that are termed destitute.  Foreclosure and bankruptcy are free market remedies that allow orderly termination and renewal.  Having said that, if there is any subsidy given it will only be for the very needy and it will only be a Band-Aid to help stabilize the markets.  Once the economy regains its legs all bets will be off. Our government can not afford to borrow to pay for peoples misfortunes.

 

I am suggesting to all those that are concerned and have affordability issues to examine the three options I have outlined above.  If you owe significantly more than your property is worth a short sale could be your wisest move.  You will need to do some sole searching and put aside the denial and moral character to benefit.  It is truly the lesser of two evils.  The debt will burry you and it will hurt your family.  Think of the short sale as an act of prevention.  It is a very constructive solution for you and your lender.  Don’t attempt it without a complete understanding or the credit side, tax implications, and personal liability associated with the mortgage note.  I do not advise that you consult only a realtor. 

 

On the subject of a realtor, we have a new client in Florida that is unhappy with their realtor and current delayed short sale solution.  Selling a property and signing a note for the unpaid mortgage debt is what your solution may entail with improper council.  Other mistakes include emptying out your retirement accounts to satisfy your lender.  On Friday I had another client sign up for the program and regretfully admit that they liquidated 200K from an IRA to pay people off for a business that went bankrupt.  Now they are in trouble with their home.  I asked why and where did they get such advice.  These are common mistakes and tragedies that can be avoided with a plan and credible advice. 

 

Please humor me for a moment.  In the jungle the Hyena will take the spoils with complete disregard if it were not for the watchful eye of the Ferocious Lion.  Regardless of what option you chose to pursue above, your family and financial well being are at risk.  Are you prepared for the role of the Lion?  Is your lender the Hyena?  Do you have the knowledge you need to make the right decision and see it through to a solution?   We talk to a lot of people facing the mortgage/housing crisis.  I would like everyone to know that the homeowner is consistently more harmful to themselves than you could ever imagine. 

 

The blog is free at blog.thenegotiatedsolution.com and the program is on special for February for only $99.95.  You make the call.  Good luck!  Blogging from the front line of the housing crisis.

 

GHunter

One of the most frustrating aspects of any short sale or loan modification, is dealing with the bank loss mitigation department.  Any person having been through this process  can attest.  First, going through the process you realize that the collection department is different than loss mitigation.  In other words, even if you have an assigned negotiator, does not mean the collections people will stop their harassing phone calls, letters, certified mailings, emails and other threats, they will not.  Additionally, you might start receiving mailings from bankruptcy attorneys, etc.  Finally, once your credit has become impaired expect your credit card companies, irrespective of your payment history, to cut your credit lines.  They figure even if you have a 25 year on time payment history with them, you are now a credit risk.

 

If you have successfully completed a short sale with the assistance of The Short Sale Negotiator Congratulations, but your work is still not done.  Two important steps remain, first is the daunting task of figuring out how to put this on your tax return.  The Law Offices of Tucker & Associates, PLLC, and their CPAs, can assist you with individual income tax preparation.  Next weeks blog, will talk about some tax strategies.  The following week, we will talk about the final step, credit rehabilitation. 

 

Please be aware that the number reported on a 1099-C is not always accurate.  This week I had a client bring in a 1099-C where Wells Fargo had reported the debt forgiveness was $420,000.  After many consultations with Wells Fargo, where they first started with a derogatory, and holier than thou attitude, we were able to get it corrected to $290,000.  The $130,000 correction, is a difference in $52,000 in taxation to the client.  In other words, pay close attention to the details.

 

Make sure your 1099-C is accurate, double, triple check all numbers.  Wells Fargo had put their BPO number in the file, but this client had netted them $130,000 higher than their BPO, it was over a million dollar loan.  Again, next week we will be back with some insights on how you report this debt forgiveness.

 

Until then, make it a great week. Guest Blogger blog.thenegotiatedsolution.com

 

Lawrence Tucker, Esquire, MBA

Principal, Tucker & Associates, PLLC

Legal Counsel, for The Short Sale Negotiator

On Tuesday evening (2-3-09) I caught an episode of Carmen On The Money on CNBC.  Carmen runs a great show and there is no doubt this lady is a class act with her heart and soul in the right place.  She clearly wants to help and inform people every step of the way.  I like her very much!

 

The first segment of the Tuesday show touched on Real Estate Short Sales.  There were three experts on the bench to assist Carmen with the call in line.  One was the credit guy that is frequently on the show, the second was a financial manager, and the third was a highly ranked financial planner with special certificates of education and accomplishment.  All three experts are accomplished people, and I don’t want to disrespect them, but we are talking about Short Sales and people are at risk.

 

One of the callers was a lady from Florida name Cathy.  She is 52 years old and she has already lost one half of the value of her home and most of her saving trying to maintain the mortgage payments.  She owes significantly more to her lenders then her Florida home is worth.  Most of the homes on her street are in foreclosure or have already been forecloses.  In addition, she has lost her job and there are no jobs in her state.  She is going to have to move out of state to find employment.  The only real asset Cathy had left was her retirement account with just over 125K.  The question to Carmen and the bench was “What should I do about the house and the mortgage”.  How would you answer this and what would you do?

 

The collective reasoning from the bench was a suggestive act of futility.  They recommended that Cathy do whatever she could to save her credit rating.   With no other resources that meant Cathy should sell the house and make up the difference by emptying out her retirement account.  The emphasis was on saving the credit profile.  Is this the right advice for Cathy?  Is this the right advice for you?

 

Absolutely not!  This is blatantly the WRONG advice for Cathy.  Carmen, shame on you!  We can teach you a credit strategy.  Credit is a journey and you will recover.  However, once the retirement money is gone, it’s gone, and you have no last resort funds.  To put things into more perspective, the lenders can’t even get at your retirement money through bankruptcy.  Why would you give it to them voluntarily.  The lenders will eat the residual mortgage debt with a short sale.  Don’t think for one moment if you are in Cathy’s situation that the advice from the show is your only option.  Wrong!

 

It’s ok.  Times are very different.  Carmen and the bench do not completely understand short sales.  The market doesn’t understand short sales.  We are clearly in the midst of the 100 Year Storm.  Cathy 52 was very resistant to the advice and for good reason.  What should Cathy do?  Follow your heart.  Don’t end up destitute.  A Short Sale with a plan and even a small bit of continuity results in forgiven mortgage debt.  Cathy’s gut was telling her not to let go of the retirement money.  Right On! 

 

The Short Sale is the weapon of choice.  I have a client where we are now completing a third transaction for over a six month period.  The grand total is ….are you ready for this… approx. 950K in forgiven residual mortgage debt.  This does not include unpaid interest that was also forgiven.  What was the cost?  The client had to collectively bring approx. $6,700 dollars to the closing tables across all three transactions in total and sign a $20,000 note.  The third transaction is set to close this month.  Who’s the expert now?   How would you rate a professional baseball player that went 3 for 3?  Are we talking Grand Slam Home Run or just and average player?  This is what we do.  Go to my home page at www.thenegotiatedsolution.com and scroll down to the very bottom and click on the label for “About”.  Read the very last line.  This is my gift to you. 

 

The “Armies Of The Dead” from “Return Of The King” are attacking the lenders nationwide.  The market is in a total state of chaos and you are at risk.  Take my gift, use it wisely, and join the onslaught.  Wield the sword with the bounty of forgiven mortgage debt, dignity, and closure. 

 

Blogging from the front line of the housing crisis and taking no prisoners. 

 

GHunter

The first article is basic but very down to earth so people can understand.  There are many benefits of a short sale as outlined in our blog and program at www.thenegotiatedsolution.com .  On average our clients get between 100K-300K forgiven with no further recourse.  It’s a process to address a complex problem but the Real Estate Short Sale Solution is the only way you can obtain forgiven mortgage debt.  Loan Modifications only move the money around to the back of the mortgage note.  There is no debt forgiveness with modifications. 

 

Here is the first article:

 

http://articles.moneycentral.msn.com/Banking/HomebuyingGuide/UseAShortSaleToEscapeForeclosure.aspx?page=1

 

The second article from the New York Times exposes the risks to people that are primarily seeking help with Loan Modifications.  There are a lot of unscrupulous people that are always looking to prey on the general public.  Our blog at blog.thenegotiatedsolution.com will save you a lot of headaches and help you set realistic expectations with loan modification.

 

Here is the second article:

 

This is a tough article from the New York Times.
http://www.nytimes.com/2009/01/15/us/15mortgage.html?th&emc=th

 

The word for the wise is to be careful and do your homework.  Blogging from the front line of the housing crisis.

 

GHunter

One of the important things to note with a Short Sale is that one of the primary objectives is to Avoid Foreclosure.  If you fail, or if your team fails you, then you lose and end up in foreclosure.  The ramifications of a failed Short Sale and Foreclosure can be found throughout our various blog entries over the past couple of months.

 

When you have decided to present a Short Sale Solution to your lenders it is important to have a plan and the right team.  A licensed real estate agent is many times an integral part of your team.  It is very important to choose the right agent and have a mechanism to ensure that the realtor is doing their part to help you with your short sale.

 

Why is this so important and why does the title of this blog include a reference to “The Freight Train to Foreclosure”.  In plain English, if you do not have a realtor that is capable by themselves or as a compliment to a team, your realtor will simply be the conductor on your personal freight train to foreclosure.  This happens all the time and the distressed homeowner suffers immensely while the realtor has virtually no accountability.

 

I am not going to criticize realtors.  I am going to tell you what they must do and what you must require of them to win.  I am then going to give you some examples of problems realtors have created that were very harshly judged by their peers, other realtors.  The fact of the matter is that there are many more bad realtors by a multiple then there are good ones that will get the job done for you with a short sale.  Again, the judgment of the faults, the ignorance, and negligence is going to be voiced in my examples by other realtors.  Realtors have been protected too long by their lobby and their proprietary MLS system.  I am going to make a motion that this also be addressed by the new administration.

 

With The Negotiated Solution we have a strict protocol that all realtors must follow.  At times we are forced to provide them assistance.  At other times we give them a gentle push and in the extreme at certain intervals we sick the client on them like a rabbit dog.  It is a personal choice, but in the end we are here to protect the distressed homeowner and help them Avoid Foreclosure with our program.

 

What should you expect from your realtor with a Short Sale?  You realtor must review the most recent comparable sales that are most representative of the characteristics to your property and in close proximity to your property.  They must also review the most recent comparable listing trends to determine how new properties that are just coming onto the market are being priced. This will enable them to determine the real bid of the market in this environment. After the property has been marketed for a couple weeks if you don’t have a contract you must demand that they do the basic follow up and track down the interested parties for comments on price and condition of your property relative to competing properties. This is very straight forward and common sense oriented, however don’t be fooled, many realtors don’t have a clue.

 

Often realtors do not spend much time pricing a property.  Many realtors will put a property on the market at what they perceive it should sell for and it will sit and sit and guess what…. you will lose.  Choo Choo.. your on the train going right where you don’t want to go.

 

If you are not watching out for your own best interest, or if you do not have a competent team, your efforts with a short sale solution will often fail miserably.  Why do realtors hate short sales as reflected in many national publications?  The reason is that they do not understand what it takes to succeed and many of the frankly are lazy and not willing to invest the time to learn. 

 

I am going to provide a couple recent examples. Before I do I want to tell you that the ignorance and the examples of futility on the part of the realtors with no plan is at epidemic levels.  Things have been good for so long that many realtors just want the commissions.  Their brokers and their governing bodies provide squat for education.  The real estate and residential lender industry is pathetic when it comes to real education and accountability.  For this reason you must protect yourself and keep your eye on the ball if you are to Avoid Foreclosure and succeed with a Short Sale.

 

I could elaborate on literally tens of examples of clients that have come to us that have ridden the bid of the market with their homes down for as much as two years to financial wreckage only to seek refuge with a short sale.  It would be unfair for me to bore you with what could be hearsay from a homeowner before I was directly involved.  The evidence or our success for this group of people lies in the fact that we obtained contracts for their homes in short order after they became clients.  Looking back past 15 months it would be fair to say that the belligerent homeowners shared the blame with their realtors in many of these improper pricing incidents.  I would like to share with you one of my recent picture frame cases of realtor arrogance and incompetence with complete disregard for the distress family facing foreclosure. 

 

Recently one of our clients had a property that was valued at $900K based on two very recent comparable sales on the same street.  Anyone with half a brain and the common decency to respect the position of the distressed homeowner would have priced this home accordingly.  Not this realtor.  This particular realtor was not from our network but was referred to us and sent us the client.  This realtor decided to price the home for $ 1 million dollars because she noted that the two comps that recently sold on the same street were short sales.  In other words, distressed sales, so they shouldn’t be counted in the pricing analysis.  I am waiting for someone to tell Mr. Market that this is a rule that better be followed.

 

My team disputed this adamantly but the realtor rose up like an ambivalent dictator and bellowed that she has sold lots of homes and that she has been in the business for 30 years.  Well, we decided to sit back and not make waves until our client was in jeopardy.  We waited six weeks and there was no contract and no offers on the property.  We began to tighten our grip on the realtor with pressure regarding the client’s position and the pricing.  The bellowing and the egotistical comments from the realtor continued.  At the eight week mark we called our client and turned them on the realtor.  The property was grossly over priced.  Between our client and the salvos of attack my team unleashed on this realtor she capitulated and quickly reduced the price to 900K.  The problem was not solved.  As we all know the markets were very volatile in Sept and Oct of 2008.  The value of this home was no longer 900K.  To sum it up the realtor was on the defensive.  She had done a major disservice to the client.  When the realtor continually repriced the property she was merely trailing the real bid of the market down.  Why not do the research and price it properly up front?  This is a question you really have to ask.  Let’s see what her peers had to say about her conduct. 

 

After another two months the clients, after continual consultations with our team, decided to dump the realtor for better representation.  A new realtor we assigned from our network that followed our pricing model and our protocol.  After checking the recent data and the listing history the new agent was appalled at the level of incompetency the previous realtor had demonstrated by the initial pricing of the property at the 1 million level.  The new realtor further commented that this property would have easily sold for 900K based on the comps in August of 2008.  Today the property has been listed by the new realtor based on the real bid of the market at 750K.  Within 3 weeks we have secured a contract for the homeowner and we are moving forward with our solution. 

 

I would also like to note that we do not employ realtors, we only choose them to participate in our network to compliment our program.  There is no financial incentive for us to use one realtor over the other if all are willing and capable to perform. In the above example the distressed homeowner suffered unnecessarily both emotionally and financially.

 

I don’t enjoy giving people the play by play but I thought it was very important in this example because we see this happen all the time.  The realtors are driving “The Freight Train to Foreclosure” and your family could be on board.  Keep in mind that many realtors see the state of their business and often admit openly that it is rife with ignorance and incompetence.  The realtors that actually care about succeeding for the clients don’t like this either.  The question we need to address is what do we do about it other then individual police work as described above.

 

I would like to give you one more example that is a bit more sobering.  Last week a realtor that has 25 years experience called me to discuss a new client.  We had gotten the client situated with our program and she was very pleased of the financial blueprint and strategy that we had put in place.  Before the conversation ended she asked me if I could answer a question for her.  This was a very nice lady and I was happy to oblige. She mentioned that she had a family recent go to foreclosure.  She didn’t note the reason but she asked me what the two big things were on their credit.  Before I could answer she asked if they were from the former lenders.  I told her yes that they were deficiency judgments on a Virginia property and that it was game over as far as having them as renewed clients for a long time.  She quietly but solemnly said, “Oh my”. 

 

Now I really like this realtor.  The fact that she asked a very good question and simply did not know is perfectly fine with me.  This realtor may have unintentionally victimized her clients by not understanding the importance of a qualified team and comprehensive plan with her clients.  This example was a short sale that didn’t make it.  I can assure you from this point forward this realtor will be seeking help because she now knows the cost of ignorance.  She simply did not know but she is going to make it right with future clients facing foreclosure and we all have to respect this.

 

The homeowner must beware and know that a hand shake and hope do not automatically win with short sales.  Short sales or any workout situation with lenders are difficult.  The problem is complex and you didn’t get into it in the past 48 hours so be realistic and don’t expect to get out of it that soon as well.  If you are going this alone with a realtor I have given you what you need to keep your eye on the ball and your foot on your realtor.  If you want to learn more we welcome you to visit our program at www.thenegotiatedsolution.com

 

In summary, our real estate industry is broken.  As the government moves to stabilize the banking sector it should also address the regulation and core competencies that direct and govern the realtors. Personally, it is my view that the MLS system should be nationalized and made available to all the people as a contiguous federal platform of property distribution for our citizens.  Further, when the scholars review the state of the realtors they are going to see a pit full of warriors with tattoos that say, “Every Man and Woman for Themselves”.  It is high time that the residential real estate lobby suffer the same accountability as Wall Street for their part in the housing crisis.  It’s time for real education, accountability and efficiency that will result in reduced commissions.  Yes there are good realtors out there, however, the stakes can be high if you don’t find one of them and end up with a rotten one.

 

Blogging from the front line of the housing crisis at blog.thenegotiatedsolution.com

 

GHunter

For people that don’t understand the concept of the good bank bad bank I am going to introduce you to my version.  Obviously stabilizing housing and allowing confidence to return to the securities markets is the key to our problem. 

 

The end game is all about basic supply and demand but there are several variables that must be addressed to succeed. From a basic standpoint, demand must be enabled and supply must be stabilized.  Specifically, I am referring to demand as perspective homeowners that would like to own a home but maybe cannot get a loan, even though they are qualified, or maybe they are too scared to buy right now.  Supply is the current inventory of homes available for sale in the overall market.  To borrower a lyric from the song “I Want to Be a Rock Star”…”How Ya Gonna Do It?” This is a good song when you are working out.  Barrack Obama is going to need to be a rock star if he going to lead and fix this crisis.

 

Let’s talk about the bad bank.  I am not referring to Citibank.  You know I love the former CEO Chuck Prince and would be very distraught if a very large bolder fell on his head.  I am referring to the concept of “Bad Bank” as keeper of all the bad assets. 

 

First let’s set some ground rules.  For arguments sake let’s assume the National Bad Bank will hold 2 trillion in bad assets.  Whether the assets are performing or not, they must be related to residential real estate only, and the lender must have made a decision to increase loss reserves against them internally for the assets to be bad bank eligible.  The Bad Bank is the accountant and the assets really remain where they are today but now everyone has transparency.  I mention that the bad bank is for residential real estate only because that is all the government has to address to save the free markets in my opinion.    The housing save will reignite the consumer confidence and get us back on a path to normalcy.  All the other lending categories will not be eligible for the Bad Bank and require the banks to sort out on their own or with other government agencies. 

 

Now, with this plan, there is no need for additional capital injections to the banks.  All the banks will move their qualified bad assets off their books to The National Bad Bank.  The “Big Bad Bank” will have a picture of a Bull Dog atop the Federal Reserve Building as its logo.  Now each bank will be a depositor of these qualified bad assets.  The will be a legislated accounting allowance for a designated period of time.  I would recommend that the bad bank program provide a duration of five years.  Again, the banks will still hold the assets and be required to work them out, but the pressure relief from market to market accounting and capital requirements will now be off them.

 

Each bank will be required to work out the bad assets.  The choices will be as follows:

 

• Loan modification without the forgiveness of principle but with affordable terms for homeowners for a minimum of five years if this option is elected. 
• A Real Estate Short Sale with the forgiveness of the residual mortgage debt.
• Property foreclosures with standard recovery protocol.

 

Any assets deposited in the “Bad Bank” will not require any capital reserves by the counterpart healthy bank.  Each counterpart bank will be focused on prudent lending and cherry picking who they would like to lend to as well as bad asset workouts. 

 

As bad assets are worked out by the servicing agents or the actual bank staff, the Bad Bank will receive proceeds as workouts progress and return the money to the good banks.  Losses will be tallied within the Bad Bank.  At the end of the program all banks will receive a tally.  This will not be a bill they have to pay.  The final bill will be the money they owe to Uncle Sam.  We all know Uncle Sam can make it happen when he gets the whole team working together.  This bill will now be monetized by the government much like the tobacco bonds of the late 1990’s.  The debt will be sold into the private market with attractive coupons.  Our government effectively gets all its money back, as the “Bad Bank” accountant, and the counterparty “Good Bank” that has been healed is responsible for the interest payments on the “Bull Dog Bonds”. 

 

It gets better…’How Ya Gonna Do It?”.  The rates on the bond sold to the market will be assessed just before the securitization point based on individual bank performance. As an example, performance metrics will be established based on the quality and efficiency that the bank used to clean up its bad assets.  Also to avoid punitive terms the metrics must judge the individual banks on how many homeowners were provided 5 year solutions that allowed them to Avoid Foreclosure and kept their homes.  Now I have your attention.

 

If you are a bank and you have 60 months with the government on your side, no mark to market on your “Bad Bank” deposits, and the capital to lend, you are going to focus on the workouts and prudent lending.  If you do a good job you may end up with a 5.5% coupon.  The assets could also be broken into segments and the performance metrics applied to each segment of bad assets.  If you do a bad job that is against the public interest you may end up with a 13.5% rate on your bonds.  Then your shareholders will give you the beat down.  The incentive will be to do a good job and balance solutions.

 

The basic premise behind this model would solve the banking crisis.  It would save our government from pumping billions more into the banks.  Uncle Sam would only be the accountant.  Free market incentives would force the banks to work hard to clean up their bad assets.  They will be pressured from their stock holders to get creative and achieve high marks so the end bond payments are very favorable. 

 

The Bull Dog Bonds would be backed by the full faith of the United States.  Any banks that can not stay in business will have to be absorbed by the FDIC and the government will have to eat the losses.  They do this today anyway so its no big deal.

 

Given that just about all the banks we have and hold dear to our financial system are cratering under the pressure of this crisis, we have to get creative and find a solution.  This will work and we can legislate just about anything as you have seen.

 

Has The Short Sale Negotiator just solved the banking crisis?  Probably not!  However, this model will enable demand for housing by freeing up the banking system capital to lend and the punitive bond rates will incentivize the banks to provide real workouts for the people. Lastly, a five year time frame removes all the panic and the banks, the homeowners, and the government will win.

 

I want to reemphasize that the five year loan modifications the banks will provide will NOT provide for any forgiveness of principle.  If homeowners want forgiveness of principle then they must provide and satisfy their lenders a free market solution in the form of a Real Estate Short Sale.  No homeowners should be given a free ride.  Everybody must share in the work toward a solution. 

 

We are not recreating the wheel here.  A five year program term with mandatory five year affordable solutions based on traditional qualifying metrics of modern day mortgages is not a great leap.  The leadership must create balance. I am hopeful that President Obama will fix this mess.  All he has to do is get a couple entrepreneurial mortgage guys in the room and this show will be on the road.  I am ready for a solution.  My Bank of America stock hit 5 today.  Now that is making me mad.

 

Blogging from the front line of the housing crisis.  Buy your “Bull Dog Bonds” with thenegotiatedsolution.com insignia on them.

 

GHunter

It is now clear that many people outside of the traditional subprime borrower are facing the loss of their home through foreclosure.  In 2007 the implication was that the subprime borrower was irresponsible and for the most part solely to blame for the epidemic of delinquency.  This has proven to be false.  In society we are always looking for a scapegoat.  That always makes us feel better and separates us from the cause.

 

Today we are facing realty.  Many people, and the majority of our customers, are not in the subprime category and they didn’t buy a home with the intentions of walking away from it.  The majority of people put as much as 25% down from savings or from the sales proceeds from another home that they owned for years.  How did all of these people get pulled into the epidemic?

 

It’s really quite simple. You can sum it up with the word ”Greed”.  Wall Street was greedy and they continued to put out loan programs that allowed people to push the limit of traditional home affordability.  The borrowers wanted it as well.  For every homeowner that is stuck in a mortgage that signed up for an Alt-A Loan Program or any fancy Option Arm or Interest Only Program it began with greed.  Where are we now?

 

Let’s first be clear and honest with ourselves.  Alt-A and Subprime etc loan programs were not created yesterday.  Wall Street is certainly to blame for the evisoration of the lending guidelines accompanied with the abundance of 100% LTV programs.  However, the fancy loan programs have been around for years but the older versions had guidelines, otherwise terms thresholds, governing loan eligibility.  For example:  In 1988 I purchased my second home with a 75% loan-to-value 3 year adjustable rate program with a Stated Income feature.  This meant that I have to put down 25% in the form of a qualified down payment and my income had to correlate to others in my employment field.  It had to be my money, gainful employment was required, etc.  It was all very sensible.  We even had option arms in the late 80’s.  They were great as the loan program of last resort.  My nickname the Option Arm at that time was “The Trashcan”.  It took a lot of time to sell one of these in the 80’s.  Realtors looked down on you if you even mentioned it to their client.  You really had to wait until the client brought it up or the realtor pushed you for whatever was available. It is simply appalling that they became such a hit during the recent frenzy in real estate.  Maybe the realtors pretended not to remember the negatively amortizing loan programs.  Maybe they just looked the other way.  I will let you answer that question.

 

The best way to sum this entire episode up is with “Greed”.  If you are in trouble with a home, whether it is a primary residence or an investment, you are “Guilty” of being greedy.  The lender is not responsible for your well being.  If you lose your job or the economy turns south you still owe them the money.  The realtor is not responsible for you either.  If you were too stupid to question their mantras like, “It’s different this time”, or “You better act now or you will be priced out of the market”, or “you better put a triple whammy auto escalator into your contract or you may not get the property”.  Does anybody remember this or are we all so convinced that we are ritcheous and victims of the economy or someone else’s actions?   It is frightening to read the papers and see all the distressed homeowners with an attitude of entitlement. It’s everybody else’s fault and I should be let off the hook.  

 

Let’s talk a bit more about the word “entitlement”.  I personally don’t like this word.  People that show up for seminars or meetings with their lenders with a presumptuous attitude that the lender is going to roll out the red carpet and fix everything are dead wrong.  Let me tell you what is going to happen.  Your lender is not going to forgive your debt.  They are going to listen to your pleas and if you are lucky they may restructure your mortgage by a small amount to assist you with affordability.  There is a high probability that your expectations during the process of negotiation will not be met.  You will become frustrated and very angry.  In the end you legally owe the money to your lender and they have the absolute right to literally beat the hell out of you in any manner they see fit.  This means that they will harass you by phone at work and at home whenever they please. They will send out nice letters and then nasty ones.  They will sick the foreclosure attorneys on you and you will get letters that you don’t understand.  You will be scared and generally bothered all the time.  You lender is going to exact a toll on you because they can.  How does it feel being a desperate beggar?  I am sure it sucks!

 

How many more Loan Modifications and government programs that fail is it going to take for you to become realistic and help yourself?  Maybe the new administration will stroke a couple trillion dollars out to get everybody out of their personal real estate hell.  If you think this will happen please stop reading this blog and never return to this site again.  If you are in this category you are a “loser”.

 

The solution is for you to understand that this is your problem.  You can both be part of the solution and get over the expectation of “entitlement” or you can continue to waffle and dissipate all your assets and end up in foreclosure.  Ignorance and the attitude or expectation of entitlement sort of bother me if you haven’t gotten my drift. However, to be fair, I want to give you the context of entitlement with a recent example so you can be the judge.

 

A lady bought a house two years ago in Virginia.  She paid 500K for the house.  It supposedly was her dream home.  She and her husband make 160K per year and they can afford the payments just fine.  Recently a young man that just finished college bought a home two doors down for her.  He only paid 253K for his home.  This made the lady mad.  During our conversation she referred to the young man as a “Punk” just out of college.  To me that sounds a bit harsh.  The “Punk”, just got a better deal then you, was my thought.  The lady was disgusted that her shack was only worth 250K.  She wanted to hire our firm to get the lender to forgive the 250K she was underwater and let her keep her house.  This is “entitlement”.  I told her pompousness that it doesn’t work quite that way.  The only way this individual can essentially have her cake and eat it to is with a Real Estate Short Sale.  Oh my she said, “I would have to leave my home”.  She just wanted the lenders to forgive the residual mortgage debt.  When I had had just about enough of the conversation I abruptly created an exit with a guarantee.  I told her I will guarantee her two things.  First the government will save the free markets and she is on her own.  Secondly, I said, “you owe the mortgage debt to your lender until you don’t”.  She didn’t like the sound of either of my statements.  This is entitlement.  Doesn’t it make you proud to be an American?

 

Where is the solution for the decent human beings that are truly proud Americans?  The solution is in the only comprehensive “Free Market” option…The Real Estate Short Sale.  With a Short Sale you can effectively have your cake and eat it too.  It is also the most responsible action you can take by providing your lender a solution in this terrible housing crisis.  The downside of winning is that you will have to move from your present home.  The rewards are high so you can rent for a year or two and you will be just fine.  In this market that is probably the best for you anyway.

 

At the end of the day the responsible people will win and effectively mitigate and minimize the adverse affects of the housing crisis on their families. The soul searchers of entitlement will get crushed.  Get on board with a Real Estate Short Sale by reading our blog entries and taking a peak at The Negotiated Solution available at www.thenegotiatedsolution.com   Blogging from the front line of the housing crisis.

 

GHunter

Everybody from the 70’s remembers the 6 Million Dollar Man. He had a bionic arm, leg, eye and ear.  The best part was when he made a bad decision he had a team of experts to put him back together again.  How nice would it be to be the 6 Million Dollar Man in this housing crisis?  There would be no such thing as a bad decision and no lenders would be messing with you.  Let me use this as a segway to reality.

 

I want to tell you a real story from November of the $46,000 Dollar Man.  This is a real man who got himself into big financial trouble with his mortgage lenders.  He has a house that is worth approximately $250,000 less than what he owes to both his lenders.  He has tried to sell the property for the last six months with a local realtor.  His last contract just died and he is in somewhat of a quandary.  Where is his team to rescue him?  Oh, that was Steve Austin from the television program.  This is real life.

 

The young man being depicted in this article has no plan and has spent no time trying to educate himself.  He has spent five complete months attempting to consummate a Real Estate Short Sale with his lenders and his realtor and thus far has failed.  The realtor called us after the last contract died and asked our group to call their client to see if we could help him in any way.  I personally took the call and found the client to be very belligerent, angry and unwilling to invest a dime to help himself. 

 

Why am I calling him the $46,000 Man?  He is not famous or on television.  Actually, the $46,000 is exactly what we would have saved him from the start four months prior to our conversation if he would have reached out for some help.  We would have saved him borrowing 16K from family and credit cards to pay the mortgage that he clearly could not afford.  This is going to wreck him financially if he allows it to continue.  We would have also saved him a $30,000 note that his first trust lender was demanding as part of the solution.  The total adds up to $46,000. 

 

Now it gets better.  When we spoke in November the second contract on his property had just died and his realtor was fed up with him.  The $46,000 Man told me, yes but the lender doesn’t know that the contract has died.  He vowed to continue paying the mortgage and dissipating assets from whatever source he could manage until he completed his short sale.

 

I asked him how much time he had spent worrying and losing sleep over this issue with his mortgage problem.  He aggregated it over many months.  I asked him if he was willing to spent $249.00 and a solid 2.5 hours with a course as a start with the option to upgrade to a full service plan and get credit for the cost of the course.  I also told him the course had a 10 day money back guarantee.  I am sure you can figure out his answer.

 

I don’t want to talk up my own book, but I do want to give everyone an prime example of a person that has no plan and is really doing harm to himself.  The realtor is eventually going to drop him and he will find himself deeper in debt.  The message here is to “Work Smart and Not Hard”.  Educate yourself with Real Estate Short Sales.  The merit can be found on our blog at www.thenegotiatedsolution.com  Don’t be belligerent and be a fool.  Your realtor is there to help you but they don’t necessarily have the skill set beyond selling the property and they are not responsible for your financial welfare.  In addition, they didn’t sign up to be your physiologist either.  You are responsible for your own plan and it is your housing/mortgage problem.

 

Unlike the 6 Million Dollar Man from the television show, the $46,000 Man is going to end up wrecking himself financially and there will be no team of experts to put him back on the map if he stays on his current course.

 

The short sale, done properly, with a financial blueprint and a proper plan that includes credit strategy, the short sale, and loss mitigation, is the only free market solution where you can effectively level the playing field with your lenders and truly win.  The government programs, the loan modifications, and all the other hype sound great but it will not yield the same results.

 

Blogging from the front line of the housing crisis.

 

GHunter

Check out the article on the front page of Saturday’s Washington Post business section. Here is the link:  http://www.washingtonpost.com/wp-dyn/content/article/2009/01/09/AR2009010901867.html  

 

Basically, it condones walking away from your house and your mortgage.  Nice article if this is what you want to hear.  Over the intermediate to long term, society never rewards people for not being responsible to their financial obligations. It sounds to me like an attorney prophesying false hope.  The fact of the matter is that a foreclosure will ruin your credit and prevent you from being eligible for a new mortgage for six years.  If you think for a minute that all lenders do not discriminate against you site unseen based on your credit profile and scores you are naive. If you are too lazy or stupid to look into better options than just walking away from your mortgage than you deserve what you get in the end.  I love the part where the professor forecasts that so many people will have foreclosures that it won’t really matter after long.  This is ridiculous.  Hypothetically, for the sake of argument, let’s assume 12 million people get foreclosed upon by their lenders.  There are 320 plus million people in our country.  Are you telling me that some scholar is trying to convince you that the lenders will have trouble staying in business by lending to the other 308 million Americans. 

 

The article is well written and sounds very soothing to the distressed homeowner.  Homeowners in distress need to investigate a short sale.  Don’t waste your time on a loan modification, they are a joke.  A short sale is the only free market vehicle that will allow you the opportunity to save the majority of your credit, have debt forgiven without fear of a deficiency judgment, and actually help your lender with a solution (thus, why they cooperate).  Responsible people that help their lenders will be rewarded and the others will be labeled deadbeats.  

 

Lastly, to discourage the ignorant people that are scared from following the message in this article, a lender can easily get a deficiency judgement for a low cost and put it on your credit.  The real cost to a lender is collecting on the judgment.  If you think you will ever recover without having to resort to bankruptcy you will not want the judgment on your credit.  It will follow you for many years and you will regret it. 

 

What about the professors and attorneys doling out bad advice?  Are they going to be there for you if their advice proves to be wrong?  The answer is no, you are responsible for your own welfare. You need to investigate if a Real Estate Short Sale is a constructive means of avoiding foreclosure.  We welcome you to visit our site at www.thenegotiatedsolution.com  .Here you will find credible information without the false hope.  Don’t take our word for it.  Validate to see if we are for real or just another nickel dime snake oil sales group.  The world is full of experts and attorneys that simply do not know what they are doing.  Be careful and do you homework and don’t believe everything you hear on the news or read in the papers.

 

GHunter